Disallowance of interest

This query is : Resolved

yogesh vijaykumar shah (Querist)
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10 October 2013 Suppose NBFC Company obtaines the loan at 16% p.a. and keeps FD with bank at 9%, Can Assessing officer disallow the excess interest i.e. 7% (16-9) while passing the assessement order. please advise us

Nikhil Kaushik

Nikhil Kaushik (Expert)
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10 October 2013 if the NBFC is able to demonstrate that the application of funds at 9% is to protect the returns, then there may be no ground for the AO to make disallowance.

For eg, it can be said that funds were kept in FD pending disbursement for loans etc.

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